The manipulations behind the attack on pensions in Detroit’s bankruptcy
In July 2013, Detroit Emergency Manager Kevyn Orr filed what could be, at $18 billion, the largest municipal bankruptcy in U.S. history. Now that a federal judge, Steven Rhodes, has ruled that the bankruptcy can proceed, a central issue will be whether the city can jettison up to $3.5 billion in accrued pension benefits owed city workers (which the city claims are unfunded). With accrued state and municipal pension benefits protected by the Michigan constitution, such a ruling would set a chilling precedent for future municipal bankruptcies.
City pension funds—one for police and firefighters and another for non-uniformed city personnel—hotly contest the city’s numbers. Fund documents show a combined shortfall of $977 million, $2.5 billion less than Orr claims. They also show the police and fire fund is 96% funded and the general fund is 77% funded, in contrast to Orr’s allegations of 78% and 59%, respectively.